Fiscal Cliff: Mortgage Interest Deduction On the Line?

WASHINGTON, D.C. (CBS/WUSA) The New York Times reports a budget deal could reduce the tax deduction millions of Americans pay on their mortgage interest.

The president and House Speaker John Boehner spoke by phone over the weekend. Multiple aides in both the House and Senate tell CBS News almost all negotiations are taking place between Boehner's staff and the president's because any deal that involves raising tax revenue is going to face its biggest challenge in the Republican-led House.

Top Republicans, returning from Thanksgiving, urged the president to make the first offer in negotiations, and they expressed a new openness to raising tax revenue, if Democrats agreed to make cuts to improve the solvency of Medicare and Medicaid.

Sen. Saxby Chambliss, R-Ga., said, "Elections come and go, and when they go, the spirit to find common ground becomes greater.

Chambliss and Virginia Democrat Mark Warner leads the "Gang of Eight" -- four Senate Democrats and four Senate Republicans who first started meeting in 2010 -- to try to craft a compromise to cut the debt.

CBS News' Nancy Cordes asked Warner, "You all have been working together for two-and-a-half years, you still don't have a final product, why should we have any confidence that the president and congressional leaders can get something done just in the next seven weeks?"

Warner said, "Well, I think anything that we would look at, we're not going to completely reform the tax code or completely make all the changes in the entitlement programs in the next seven weeks, but over this last two-and-a-half years, we all know where the issues are. So can we make enough of a down payment to assure the markets and put a real process in place that will allow us to work through this."

Chambliss says he and other Republicans still oppose hiking tax rates on the wealthy -- a move they contend kills jobs. Instead, Republicans propose limiting tax deductions for high earners. One idea is eliminating the mortgage deduction for second homes.

Sen. Mitch McConnell, R-Ky., said, "We have been open to revenue by closing loopholes as long as it's tied to spending cuts and pro-growth tax reform that broadens the base and lowers rates."

But Democrats argue that closing loopholes alone will not raise enough money to significantly put a dent in the debt. They still believe that tax rates for the wealthy need to go up at the end of the year. That's going to be one of the biggest sticking points in these negotiations.